Thursday, July 7, 2016 / by Kristin & Mark Stampini
Undisclosed Legal Mistakes Costing Boca Raton Homebuyers Thousands
Someone we want you to meet
CEO of Florida Platinum Group, Kristin Stampini was speaking to attorney Erik Eastham about legal mistakes to be aware of in regards to real estate, and this is what he had to say.
By Erik Ian Eastham
Boca Raton, Fla. – Whether someone is purchasing a main residence, vacation home or other investment property, real estate is often times an individual’s most valuable asset. Much of an individual’s net worth is defined by the real estate they own or have an interest in. As any smart investor will tell you, it’s not enough to own the asset, it must be protected as well; protection from the claims of creditors and the liability that comes with real estate is a necessity.
A novice investor ?may rely solely on? insurance to help protect their real estate investment, however, insurance policies have dollar limits and coverage limitations. As such, a savvy investor will often rely on more than an insurance policy to ensure all their assets are protected; the savvy investor will likely not take real estate in their individual name.
Often, the best way to truly protect a real estate asset is by not owning it in the individual’s name. As such, it’s not necessarily what you own that is important, but how you own it. Many legal tools can be used to properly insulate the investor from any liabilities that may arise from real estate and reduce the risk of loss of the asset itself.
This article will briefly explain a few legal tools, which may be used in properly protecting your real estate asset.
Protection of the Main Residence
Pursuant to the Florida Constitution, an individual’s residence has 100% homestead protection. This means that no creditor can take your residence away from you. There is an exception to this rule; however the following three types of creditors may foreclose on your home: the mortgage holder, the holder of a contractor’s lien, and the county if you don’t pay your property taxes. Because the main residence is homestead protected from all other creditors, it is not necessary to own the home in the name of an LLC, Real Estate Trust, or Limited Partnership. However, it is prudent to own the home in the name of a Revocable Living Trust.
The main purpose of a Revocable Living Trust (RLT) is to avoid the cost and time restraints of probate. Probate is the legal process that must take place to move assets from the dead to the living. Often times, the individual’s family members are left with the burden of paying the costs of the home during the process of probate; with an RLT the home may be sold immediately. One-way individuals try to avoid the cost and time restraints of probate are by deeding the home, while they’re still alive, to their children either outright or as joint tenants. This is not proper estate planning. By deeding the home to your children while still alive, you can lose a portion of your homestead tax exemption and will likely result in the children having to pay high taxes when the home is sold.
Investment Property and Second Homes
Any investor looking to buy a second home or other investment property should seek legal counsel on the proper way to protect the new real estate asset and protect themselves from the liability the asset carries. Two of the most popular ways to own investment property are with the use of a Limited Liability Company (LLC) or a Limited Partnership (LP). Both of these entities will help protect the investor’s personal assets from lawsuits arising from the property by a tenant, guest, or government entity. If the entity only owns the investment property, only the investment property may be subject to a claim/judgment. LLCs and LPs will also protect the investment property from any claims or judgments the investor may have against them personally. Investors are wise to recognize the multitude of lawsuits and legal settlements that occur in our state and nation and to protect themselves from them. For example, many investors may be surprised to learn that they could be liable to a tenant for a burglary or robbery if a court were to find insufficient security as a contributing factor to the crime.
Limited Liability Company
LLCs have become very popular in the investment community because they are cheap, easy to set up, easy to maintain and most importantly, limit the liability of the members from the creditors of the LLC. They are also popular because many people think they can set them up without the help of an attorney. Although an LLC can be set up without the skill of attorney, it is not prudent to do so. Many investors have set up LLCs
LPs are analogous to LLC since they both offer limited liability and insulate the investment from the personal liability of a member or limited partner and vice versa. However, there are three major differences: (1) LPs have General Partners who are personally liable for partnership debts; (2) LPs have Limited Partners who don’t have managing control of the asset; and (3) LPs have hundreds of years of legal history behind them. This final distinction is an important one as it evens out the potential negative aspects of 1 and 2. LLCs are relatively new to the legal world. As such, it’s not always known how a court will rule whereas because the legal history behind LPs is so incredibly grounded, a result of a claim is likely known at the outset. ?In summary, purchasing real estate is often a sound investment, an exciting venture and done with the goal of having the real estate increase our net worth and possibly supplement our income.For any real estate questions or inquiries, I suggest contacting Florida Platinum Group- Re/ Max Services.
If the goal is to be properly met, it isn’t enough to simply own the asset. The asset must be owned in such a way that it ensures the investor’s personal protection and the protection of the asset itself.
Over the years, we have done a lot of business with the clients of Florida Platinum Group – RE/MAX Services and their real estate team.
If you would like to discuss the points of this article with an attorney free of charge, call Eastham Law Offices at (561) 395-6800 to set an appointment and mention this article and Kristin Stampini.
Eastham Law Offices has been legally servicing the community for thirty years and is located at 138 West Palmetto Park Road, Boca Raton, FL 33432, which is just West of Mizner Park in Boca Raton.
Erik Ian Eastham has continued the advancement of Eastham Law Offices in the legal arena, successfully representing numerous clients in Estate Planning, Probate, Asset Protection, Guardianship Proceedings, Will Contests, Bankruptcy, and other legal matters, often times saving, winning and protecting our clients and their assets while maintaining a personal relationship with his clients.
If you have a legal issue or would simply like your estate reviewed, please feel free to contact eieastham@eastham- lawoffices.com.
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Author: Kristin Stampini – CEO Florida Platinum Group – RE/MAX Services
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